Intro
This guide contains a series of practical tools to assist with the development of an Asset Management Plan for a facility.
Sport and recreation facilities are integral to our daily lives and we all rely on them to help us to continue our healthy and active lifestyles. It is now more widely acknowledged that whole of life asset management is critical to sustain a level of service to clients and provide a return to you as the owner or operator of the facility.
We expect our sport and recreation assets to provide specific services at an acceptable level. Whether it is a playing field or a large recreation building, each needs to be managed so that they do what we expect of them.
When you have developed an effective asset management plan you will be ready for a range of eventualities that could affect the future of your asset. It will also give you confidence that you can adapt to the effects of environmental, social and economic factors.
Whether you are in local government or a sporting organisation, this guide will provide you with an appreciation of the benefits of strategic asset management. It will also help you to consider the financial and economic requirements of asset management and the treatment and management of risk and liability.
We have included practical examples and appendices to show you how to apply asset management principles effectively to enable you to continue to provide and maintain key assets with a greater level of sustainability. You can adapt the appendices as needed so they reflect your particular organisation’s needs.
A guide for sport and recreation facility owners and managers.
January 2004ISBN: 0-975040030
This resource contains comments of a general nature only and is not intended to be relied upon as a substitute for professional advice. No responsibility will be accepted by the Department of Sport and Recreation for loss occasioned to any person doing anything as a result of any material in this resource.
Acknowledgements This guide was prepared by Brett Treby and Rob Didcoe of the Department of Sport and Recreation’s Facilities Branch.
Western Australians are fortunate to have a large number of quality sport and recreation facilities. They are a key feature of our successful sport and recreation industry and a vital part of the way we live.
The community expects facilities to be safe and attractive places in which to be physically active. It expects well-maintained facilities that reflect value for money and a reason to keep coming back.
So, it is vital that anyone who is responsible for the management and maintenance of a sport and recreation facility has an asset management plan in place.
In many cases the managers of the most recently built facilities in WA are already doing this, but there are many ageing and poorly maintained facilities that need attention.
Maintaining or renewing these facilities has been complicated by issues such as:
The department developed this Asset Management Guide as a starting point for local government officers, elected members and state sporting organisations to develop asset management plans.
It is a reference tool that I expect will become an important part of your business management and, when applied, will reflect your desire to achieve good corporate governance.
I commend this guide to you and wish you well as you begin to develop and implement comprehensive asset management plans so that Western Australians can continue to enjoy access to sport and recreation facilities that encourage and promote physically active lifestyles.
You are reading this guide because you are responsible for the management and maintenance of sporting and recreational facilities.
It contains a series of practical tools to help you through the process of developing an asset management plan so that your facilities are productive and sustainable.
Sport and recreation facilities are integral to our daily lives and we all rely on them to help us to continue our healthy and active lifestyles.
It is now more widely acknowledged that whole of life asset management is critical to sustain a level of service to clients and provide a return to you as the owner or operator of the facility.
You can apply asset management principles equally to all physical assets including: infrastructure; property; heritage; reserves; water bodies; and plant and equipment.
A critical issue is the extent and degree to which these principles need to be translated into management action.
Whether you are an executive or senior manager in a local authority, executive officer or office bearer of a sporting body or recreation group, it is important for you to identify your key assets.
Below are some primary considerations for asset management principles:
Deciding whether to acquire, replace, use, maintain or dispose of an asset should be part of your organisation’s overall strategic plan.
You can achieve this by linking assets with program delivery standards and strategies.
As a local authority, sport or recreation organisation or multi-sport facility, developing an asset strategy will complement your operational or business plans.
All organisations need direction and should undertake regular strategic planning. A typical strategic plan looks ahead up to five years. Part of the strategic planning process will include issues or events that could have an impact on your organisation’s operations.
Asset management planning should be part of the mission and vision of your organisation so you should link resource planning to your long-term objectives.
The Local Government Act 1995 requires all local authorities to undertake an annual “Principle Activities Plan” that looks at what the authority will do over the next 12 months. Many councils are now including longer-term strategic planning in addition to principle activity planning.
Similarly, your sport or recreation organisation should set out your long-term strategic goals to give you an appreciation of the need for asset management and provision to support program initiatives.
In an environment of sustainability your organisation must also consider the needs of user groups and the capacity of current assets to meet those needs.
You should consider:
We will look at each of these key strategic areas later in this guide.
User demand is a fundamental component of any asset provision and management analysis.
It is an effective way to determine current and projected usage of a facility and any shortfall between that demand and the present level of asset provision.
So, if your organisation is considering taking over or acquiring an asset you should find out what the facility or asset is currently delivering and how it is being used.
These investigations should include:
The results should help you to identify any areas that deviate from the present level of asset provision. A needs analysis will provide useful information to help you make quality asset management decisions.
Information on how to conduct a needs analysis can be found at the department website.
A needs analysis is normally undertaken for new facilities, but the process works equally well with new or upgraded facility or asset provision. Implementing and reviewing a needs analysis can be subjective and should be supported by empirical data and standards for like facilities or assets.
In cases where it is critical for you to comply with existing standards you should refer to ISO9001: 2000 which details the methodology to be used.
You should only take action in relation to an identified gap in asset service provision if it is consistent with your organisation’s strategic goals and if it falls within your organisation’s area of responsibility.
Critical success factors are those issues that your organisation decides are fundamental to the successful running of your facility or asset.
They are linked closely with associated risk management strategies and the paramount reasons for undertaking asset management strategies.
An example would be the effective management of a chemical system at an aquatic centre. Providing a primary and back-up system to correctly disburse chemicals would be critical to the success of the management of the facility.
Critical success factors need not involve life-threatening situations, but would typically be those that would stop you from delivering the primary service provided by your asset.
Critical success factors should be identified while undertaking strategic asset planning and apply a weighting to ensure that each separate critical success factor is highlighted and addressed as part of an integrated asset management plan.
OutcomeIntegrating your asset management strategy into an operational or business plan will provide you with a framework to get the optimum use out of existing and new assets.
An effective asset planning framework will include an evaluation of the alternatives to acquiring a new asset and the replacement of an existing asset. The evaluation will include a comparison of life-cycle costs.
An acquisition plan details the rationale for acquiring, upgrading or replacing an asset.
It will include:
Implied costs may include a notional interest cost on funds used to acquire assets.
Expressed costs will include direct and indirect operating costs.
Scenario planning is extremely important when considering the key factors that will influence asset planning in the future.
The aim of scenario planning is to identify signposts (either triggers or warnings) and decide upon the most appropriate way to exploit opportunities or minimise threats.
Scenario planning will help your organisation to see how different forces can manipulate the future and help you to understand and prepare for uncertainty.
For the sport and recreation industry, scenario planning will help you to consider participation and utilisation trends; changing demographics; changing legal obligations and make more informed asset provision decisions.
To gain an understanding of the benefits of scenario planning, you must look at current situations and compare them with the rationale supporting the original decision.
Consider the air handling system associated with an aquatic redevelopment.
The system collects air from inside the complex and pumps it outside and provides fresher outdoor air for patrons inside the facility. The problem is that both air vents are located on the same external wall. The primary issue is that the exhaust vent was located on the windward side of the supply vent, which meant that some of the exhausted air was being drawn back into the building.
Scenario planning would have considered alternative designs to achieve better construction and operational outcomes.
The optimum approach to scenario planning can be distilled into the following points:
You should consider all available alternatives if your asset planning is to address community demand for new or improved sport or recreation services.
This would include:
Each of these points should be considered against a baseline option of the consequences of adopting a ‘do nothing’ alternative.
As a logical follow on from scenario planning, the implications of deciding either an asset or non-asset solution should be supported by qualitative, quantitative and empirical data to show the benefits, consequences and costs associated with each alternative.
There are two basic asset alternatives you must consider if you are planning to acquire a new asset to satisfy a community need:
The capacity to recover full operational costs – let alone capital costs — in the provision of community sporting or recreational facilities is minimal. This is due largely to clubs and sporting groups historically having dedicated use of facilities, which limits opportunities to maximise use. Returns would be greater if the operational and capital costs could be spread across a larger user base. Therefore, collocation is a highly effective model compared with single use facilities.
For many years, lawn bowls has enjoyed broad community sport. However, our changing society and community preferences have diminished the sport’s sustainability of facilities. A declining membership base and the need to upgrade facilities has meant the sport has had to consider broader options.
A number of bowling clubs in the metropolitan area have considered two successful options:
Both approaches result in a level of concern among members but the opportunity to expand the membership base provides a greater opportunity for the facility to be sustainable by using a non-asset approach.
Materiality refers to issues that are directly relevant to the decisions you make about asset management. They may include:
You should consider each of these issues and weigh each one to reflect their order and level of importance.
Having previously established that an asset exists to provide a specific service, you must now work out how the asset will deliver an agreed level of service and continue to meet the expectations of those who use it.
The owner and the operator must agree on their roles and responsibilities whether they are the same organisation or separate. Roles and responsibilities must be put in writing and clearly state the expectations of each party.
Setting benchmarks provides a sound basis on which to establish what the asset is expected to achieve operationally.
Benchmarking would look at key result areas (KRAs) necessary to understand and agree upon operational parameters and outcomes. The owner and the operator would use the KRAs to identify and agree upon key performance indicators (KPIs).
See Appendix A for examples of KRAs and KPIs.
Once these have been established and agreed, it is customary for the asset owner and operator to form a joint working group to meet and discuss the ongoing performance of the asset. The working group should meet monthly or a minimum of every three months.
The agreement between the owner and the operator should also provide the opportunity to vary the delivery of services provided by the asset.
A more efficient and cost-effective asset management framework that will reduce demand for new assets, extend asset life, lower program costs and improve delivery of services or products.
An operation and maintenance plan which establishes standards for the level of use, condition, maintenance and performance of assets. The plans also document the resources required to operate and maintain assets.
The contemporary accounting model is accrual accounting, which recognises debts and revenues when they are incurred or earned. The other more traditional method is cash accounting, which recognises debts and revenues when they are received or paid.
For asset management, an overarching principle in accrual accounting requires that funds (as a balance sheet item) be set aside in reserve accounts to replace the asset at the end of its economic life.
Swimming pool filtration and pumping equipment may have an economic life of 15 years.
With straight-line depreciation, the full new purchase price of the asset ($500,000) would be divided by 15 and that amount ($33,333) placed into a reserve account each year.
The annual depreciated (or accumulated) amount of $33,333 becomes a cost to the organisation and is recognised as a non-current liability on the balance sheet.
Additionally, works undertaken that materially affect the life, capacity or performance of the asset need to be recognised as capital expenditure and have a direct impact on the calculations of depreciation.
Further information can be gained by accessing Accounting Standard AASB 1021.
In a cash accounting environment, some organisations may not account for depreciation by this method. However, in terms of sustainable asset management, setting aside funding for future replacement is highly regarded.
In appreciating the financial impacts that operational changes have on assets, you should factor issues such as betterment, rehabilitation, acquisitions, enhancements or replacements into the depreciation equation.
Capital investment decisions concerning these issues are dealt with in 3.2 below, though they are based upon operational performance requirements.
Costs associated with consumable items associated with the asset are not considered capital expenditure and are not considered within the depreciation equation.
When you review an asset you should remember that it exists to serve a specific purpose. You should also consider the issues raised in the Integrated Planning section of this guide (see page 6).
Asset performance should directly relate to operational requirements in the strategic plan and demonstrate that they are required and are performing at the desired level (refer 2.4 on page 10).
To ensure that performance requirements are being met, you should carry out regular condition reports. While closely linked to the risk management process, condition reporting is where you examine your asset to be sure that its operation service delivery targets are being met.
Assessing the condition of an asset involves systematically examining components and systems and documenting their condition according to the relevant standards for each element.
Recording the assessments will help with forecasting and benchmarking maintenance expenditure. The information will help to keep your asset register current. It will also be a guide to identifying under-utilised and over-utilised assets.
Equally important is the environmental condition of the asset. This means where the primary asset or facility is located and what is surrounding it that may influence its performance.
A condition report will identify risks immediately near the primary asset that demand attention.
For examples see Appendices D, E, F, G, H.
The reporting of asset condition has a direct bearing on the preparation of your organisation’s annual budget for operational and capital expenditure, in addition to strategic planning implications.
Your organisation should develop and maintain an accurate asset register to:
Recording and maintaining information on an asset register must be carried out according to provisions set out by Australian Accounting Standards Board (AASB).
It is important that the information is calculated as it relates to asset life and depreciation rates. To ensure accuracy in financial reporting and reserve account management, the calculation of annual depreciation for like assets should occur equally between different organisations.
Information on asset management should be recorded and stored so that it is easily maintained and transparent across operating systems. This can be done using common proprietary software packages and generic spreadsheets.
Your organisation should follow contemporary management practices and have up to date asset recording systems, electronically and in hard copy. Copies of this information should also be stored off site in the event that it is destroyed.
The information should be user friendly and easy to understand. Where possible you should include footnotes or explanatory comments so that all staff can clearly understand what has been recorded and where it is kept, with cross-referencing to explanatory notes, accounting standards or legislative requirements. The information should be distributed from time to time to maintain its operational integrity.
Effective accountability mechanisms will establish a culture where assets are adequately maintained and protected and, through optimisation of performance, maximise their outputs or service potential.
An effective internal control structure will establish and promulgate asset policies and procedures and use an information system that provides reliable, relevant and timely data with which to make informed asset management decisions.
A policy and procedure manual which details the requirements for effective governance of assets is complemented by an information system, based on an asset register, which provides the financial and non-financial information necessary to manage assets.
In simple terms, your organisation must budget for the full costs associated with the development and management of assets or facilities. This provision extends beyond the cost of building or buying the asset and includes all costs associated with running and maintaining the asset until you no longer own or operate it.
Where possible you should involve the operational staff in the development of the budget because they have detailed knowledge of the day-to-day and ongoing costs associated with the asset. However, ultimate budgetary control rests with the manager appointed to oversee the facility or asset.
The budget must incorporate the full life-cycle costs associated with the asset. Life-cycle costing is a complex process and should be based upon the concepts of accrual accounting. The Department of Sport and Recreation will develop life cycle costing guidelines in the near future. Until then, we encourage you to consult the relevant Australian Standard AS/NZS 4536:1999.
A service level agreement (SLA) is a contract between a facility asset owner or manager and an organisation engaged to deliver services associated with the primary asset
From a customer’s perspective, there should be a seamless relationship between the principal and the SLA organisation.
The delivery of this service is affected by a number of key elements:
For an example of a service level agreement see Appendix B.
The principal — or asset owner — typically enters into an arrangement where a service or number of services associated with the function of an asset are provided by a second organisation.
The principal must be satisfied that these services, while important, are not core to the function of the asset or facility and can be adequately carried out by other parties. In these circumstances, it is important that the principal establishes a risk management strategy directly associated with the service that is being transferred to the second party.
Once the risk management strategy has been established, both parties should develop a formal agreement setting out the rights and responsibilities associated with the services to be undertaken.
This kind of arrangement must support an agreed level of asset performance to ensure that continuity of asset service is assured to users.
The principal must ensure that the level of service being provided by the contracted organisation supports both a level of service continuity and asset quality.
Both organisations should agree on how to measure and track performance, particularly in relation to asset management. The aim is to make sure that the principal is fully aware of the condition and serviceability of its assets and facilities.
The SLA must clearly set out the rights and obligations of the principal and service provider, particularly the delivery of services and management of facilities and assets under the control of the service provider.
Both parties should be clear on their rights and obligations so that each understands the other’s obligations.
A management committee should be established and it should meet regularly to discuss issues of service delivery, management and maintenance of the principal’s assets or facilities. This type of forum is the best way to ensure that both parties have regular contact.
The SLA should clearly set out the fees and charges associated with the contract. Further, both parties should understand the true level of their economic exposure.
The SLA must also detail penalties for breaches of contract by either party, and how they will be identified. The contract should clearly state how issues can be mediated and/or remedies available to each party, including (but not limited to) liquidated damages.
In order for the relationship between the principal and the service provider to be maintained, the SLA should clearly document the roles and responsibilities of each party.
Further, it is important that each organisation agree to a process that provides the opportunity to contractually amend their roles and responsibilities to deliver process benefits that will enhance asset or facility utilisation.
Risk management has become a formal management tool to systematically identify and manage risks throughout the life-cycle of an asset. The process helps to meet service delivery more efficiently and reduces the prospect of financial loss.
To better appreciate risk management, it is recommended that you consult Australian Standard, AS4360 and Handbook 246 (2002) Guidelines for Managing Risk in Sport and Recreation.
To identify risk, you should first have a clear understanding of the environment in which your asset operates and a strategic view of factors that could impact on your operation. This would include but not be limited to:
Once you have done this, you will gain a clear understanding of your organisation’s goals, objectives and strategies. You will further understand your organisation’s capabilities and limitations and will be in a better position to develop strategies to address each area of concern identified.
Undertaking this approach will identify a series of risks to your organisation.
Once identified, you should assess the likelihood of the risk in terms of occurrence and the consequences associated with the risk occurring.
The three primary stages of risk management are:
Your organisation should also develop and maintain a risk register that would include:
Having identified and categorised each risk, you then need to monitor and treat it. Adopting the following steps will help this process:
See Appendix C for a detailed risk management procedure.
This process should be closely aligned to the performance of an asset or facility. It is important to monitor risks and the effectiveness of risk treatment plans regularly.
The frequency will depend on the type of risk.
An effective internal control structure that provides the framework to improve asset management. Without it there is limited scope for informed decision-making or implementation of management’s intentions.
An effective asset disposal framework should include alternatives for the disposal of surplus, obsolete, under-performing or unserviceable assets. Alternatives should be evaluated in cost-benefit terms.
A plan that sets out the reasons; time frame; method; and expected proceeds for the disposal of an asset.
Once an asset or facility has reached the end of its functional or physical life you will have to decide whether to dispose or decommission, update or replace it. Each has financial and organisational implications.
The following components should be considered:
You must carefully consider how you will retire or dispose of an asset if the service it provides is to be ongoing.
In cases where you have decided on replacement, you should develop a project plan or business case to smooth the progress of the decommissioning or disposal, and the seamless provision of a new or refurbished facility.
You may be required to undertake an environmental analysis of the disposal of an asset or facility. This may involve the physical structure and the materials or components that may be considered detrimental to the environment such as asbestos sheeting.
There may also be environmental issues that require the site itself to undergo remediation as a consequence of the facility being decommissioned.
This level of analysis looks at the potential for impacts on workers involved in the decommissioning, staff or the surrounding community during the decommissioning of an asset or facility.
This would be the case in the decommissioning of a chemical plant, a power generation plant or some aspects of an aquatic facility.
Replacing an asset may result in new opportunities for a facility other than demolition. There may be scope for it to be used for something else.
Recent examples in the metropolitan area include converting former lawn bowling facilities into community centres and parks for use by the surrounding residents.
Effective management of the disposal process will minimise holding surplus and under-performing assets and will maximise return to the owner.
A structured process that seeks to ensure that all necessary functions of a project are provided at the lowest cost, while maintaining required levels of quality.